ERP HR Modules: The Perks & Potential Risks of Integrating Human Resource Management

As the Enterprise Resource Planning (ERP) market size reaches its expected $49.5 billion worth, organisations are understanding the advantages of integrating all business processes through ERP modules, one being an ERP HR Module.

A 2023 report indicated that 41% of ERP users have integrated their human resource processes, ahead of modules for marketing (40.5%), customer service (32.8%), procurement (27.2%), and manufacturing (20.5%).

An ERP Human Resources module provides submodules similar to that of an HRIS or HRMS. These help to:

• Streamline payroll, admin, and recruitment tasks
• Improve efficiency and time management among HR staff
• Reduce errors and duplication through accurate data reporting
• Provide greater support for hybrid and remote workers with cloud capabilities

The flow and availability of information from an ERP system improves collaboration, communication, and mentorship between managers and teams – something that 75% of Senior HR Managers require from a high-performing workplace.

However, HR departments must understand the potential for risks when integrating HR processes, as the complexity of an ERP system can lead to confusion and require further staff training.

How an HR Department Benefits from ERP Integration

Over half (57%) of all UK businesses believe an ERP system will help them to become more agile, meaning the vast majority of human resources departments will experience some form of ERP HR module integration.

For HR Managers, their focus is on the people of an organisation and how they can improve efficiency in three key areas:

1. Strategy
2. Operations
3. Administrations

Dedicated HRM and HRI systems provide everything needed to meet the requirements of HR managers and teams in these three areas, as does an ERP HR module.

Whether replacing a legacy system or shifting from manual methods, an ERP HR module provides submodules combined with ERP capabilities to benefit core HR tasks, such as:

• Sharing of employee information (such as employee records, performance reviews, and payroll) across all business departments and functions to improve decision-making
• Working with one shared database to compile and analyse information in a single source of truth
• Deeper insights and reporting when it comes to workforce management (such as performance tracking, time management, incentives and deductions, and skills training)
• ERP automation capabilities reduce labour time for HR staff when it comes to recruitment, onboarding and payroll
• Employee engagement is increased through the use of chatbots and self-service dashboards
• Self-service portals are set up to empower employees to update personal information, schedule leave days, and enrol in benefits

Use Our ERP Software Finder to Identify the Best Tool For Your Core Human Resources Processes

6 ERP Submodules That Integrate and Impact Core HR Tasks

There’s an ERP HR module, and then there are HR submodules. Submodules go a level down and focus on a business’s core human resource tasks. These refer to the most basic but important functions of an HR department.

For example, benefits management is an ERP HR submodule. This focuses on information for employee health insurance, pension, and spending accounts. Six HR submodules work together seamlessly and impact core HR tasks the most.

1. Payroll

Commonly interlinked with an HR module, a payroll submodule embraces automation. As payroll processing is a complex and time-consuming task, ERP automation is welcomed by parol managers. One-third of small businesses spend more than six hours a month handling payroll.

Combined with shared information including time management and performance tracking, payroll can accurately calculate salaries, benefits, taxes, and deductions.

A payroll submodule provides support for every country in which a business operates. If a business is multinational, that includes operating in different currency rates and being sure to file the appropriate tax documents.

2. Time and Attendance Management

Automation plays a role in generating timesheets and tracking attendance. These timesheets are aligned with an employee’s payroll, alerting payroll staff if sick pay needs to be applied or a deduction in wages for unnotified leave.

A time and attendance module will also monitor overtime and manage leave requests. This then alerts department heads to employee absences in each department.

3. Reporting

Having an influx of information from all business departments and functions enables staff to generate insightful reports and analytics. Not only can an ERP HR module help reduce time to insight by 75%, but it also allows for better decision-making with the use of accurate employee data.

As an example, HR managers can access dashboards displaying data on:

• The average age of employees
• Where most employees work (country, department, etc.)
• The average tenure/churn rate
• The average amount of money spent on employee wages and benefits

4. Recruitment

ERP HR modules take data from submodules such as performance tracking to indicate business areas for employee recruitment. Recruitment submodules are also open to all department heads for posting job vacancies, scheduling interviews, and tracking applicant progress.

Recruitment tasks are crucial for businesses, with 46% of HR leaders reporting that recruiting was their top priority in 2023. A PwC survey also indicated that 58% of businesses now use HR-specific technology to recruit and retain top talent.

5. Onboarding and Development

Onboarding submodules utilise integrated data to ensure businesses are providing the most productive and efficient onboarding experiences. Automated ERP functions mean new starters receive the correct working equipment (laptops, uniforms, etc.) for their specific role, on time.

Onboarding is then tracked to understand what training is required, when orientations are scheduled, and to monitor employee skill development.

6. Performance Management

An ERP HR module stands out when tracking and analysing employee performance. Shared information is combined and exported into detailed performance reports that show where employees are in terms of their set targets. This allows leaders to:

• Set alternative/amended performance KPIs
• Conduct performance evaluations
• Provide a detailed level of feedback to employees
• Track performance levels over a certain period

Challenges Facing HR Departments When Adapting to Integrated Working Tools

Inevitable Teething Problems

When working with a new system, there will always be teething problems – such as:

• A slower way of working as employees understand new workflows
• Frequent system bugs and mishaps that need to be ironed out
• Accessibility issues for dashboards and employee self-service portals
• Waiting for data to be migrated from previous legacy systems

Adapting to a Complex System & New Way of Working

ERP systems can be complex, which requires time to get used to how it works. In terms of core HR functions, familiar workflows may now seem unnatural. The potential learning curve for HR teams can be huge, meaning training and support will be required. Staff will need to familiarise themselves with new areas such as:

• A system’s user interface
• Unfamiliar features
• Understanding the potential of an ERP’s integration functionalities

This cannot only be a time-consuming process, but it means staff will be out of action while they learn the new workflows of an ERP HR module.

Dealing With the Intricacies of System Migration

The implementation of a new ERP system can take anywhere between 3 months to 3 years. In that time, there are multiple factors to consider when migrating from either a paper-based model or a legacy system.

The migration of existing data is one concern for HR departments; will it be exported successfully, will the data be presented familiarly, and how long it will take to migrate?

There are also the technical challenges of system migration, which are mostly covered in further training and support. But, understanding how new submodules – which have replaced familiar specialised HR tools – operate can be a time-consuming and frustrating process.

How an ERP HR Module Compares to Other Human Resource Management Systems

Switching HR systems is a delicate process that should involve leaders from all departments and teams affected. Ideally, a member of the human resources department should be involved in the decision-making process.

The risks of moving from a familiar HR tool to a completely new set-up, include:

• How long it’ll take to integrate and get started
• How the process of managing core HR tasks will be affected
• Whether the system is easy to use
• Does it have an easy-to-navigate UI

Although teething problems are common in the short term, switching to an ERP HR module can have a good return on investment for HR departments. Particularly when comparing the differences between alternative ways of working:

FAQs

What Is the Best Human Resources ERP Solution?

Several vendors are offering a blend of ERP and HR solutions with many ERP HR modules built into the product. The best ERP HR solutions include:

• Sage
• SAP
• Infor
• IFS
• Oracle
• Workday

What’s the Difference Between ERP and HRIS?

An ERP system incorporates all business functions while providing modules that have multipurpose functionalities for different business areas, including human resources. As well as offering further capabilities due to its integrated ability to collect and analyse business data from all departments.

An HRIS (Human Resource Information System), on the other hand, is a program dedicated solely to the management of HR tasks. It focuses primarily on tasks such as payroll, employee records, and recruitment, but doesn’t provide the broader scope of an ERP system.